What techniques do filmmakers use to distinguish dream sequences from reality? I heard it's one of the things you don't learn in art school, because there's no agreed upon techniques or standards for doing this correctly and there are infinite ways of doing this and all filmmakers use different techniques of their own. Is this true, or is there some techniques used by many filmmakers?
Just watch some movies!
Fuzzy edges to the image are most common (an older technique, think A Christmas Story), then having the dreamer suddenly wake up after the dream event is a close second (and more common now-I was just watching an episode of 2&1/2 Men where this happened repeatedly for comic effect). Some have a reveal in the dream (something physically impossible, or a dream character telling the dreamer they are dreaming). Occasionally, they DON'T try to distinguish one from another, except that the two are incompatible plot-wise, leaving the movie-goer to decide which is real and which is imaginary. Or entire chapters in a book (scenes in a movie) can be devoted to non-real sequences (like in The Illustrated Man).
You can get even messier in sci-fi. There, dreams might BE real. There's an episode of Dr. Who where the characters themselves don't know which events are real and which are imagined. The Matrix blurs the lines between what is or isn't a dream. An time travel means the same events can occur more than once and be different in each version (think Inception). So how out there do you want to get? It's only limited by imagination.